- July worker remittances down 1.6% to US $ 619mn
- But first 7 months remittance earning up by marginal 0.5% to US $ 4.2bn
Worker remittance to Sri Lanka continued its declining streak as Sri Lanka’s largest foreign income earner and one of the two current account stabilisers is facing the crucial test of rebalancing socio economic changes in the Gulf.
Worker remittance to Sri Lanka declined 1.6 percent to US $ 619 million in the month of July from a year ago. July became the month to witness a decline in the remittance income for three consecutive times.
However, worker remittances in the first seven months of the year up to July grew by a marginal 0.5 percent to US $ 4.2 billion.
On average, Sri Lanka receives US $ 7 billion from worker remittances for a year, roughly an 8 percent of the Gross Domestic Product.
Worker remittance to Sri Lanka has been erratic since Gulf countries curtailed their quotas for foreign employees after the region suffered from declining oil prices for nearly three years.
However as the global oil prices are now in a rapid ascent to reach, probably even hitting US $ 100 a barrel, gulf economies are slowly rebounding.
However, the recent crisis in the Gulf caused by the oil glut upended their economies as their new leaders are taking rapid steps to diversify the economies while granting more social freedoms, which could put more of their own citizens to work.
Economic diversification will also open up more jobs for expatriates in high-paying skilled categories, an opportunity Sri Lankans can benefit from.
The majority of the Sri Lankan migrant worker population work in the Gulf as either semi-skilled workers or domestic aides.
Meanwhile, earnings from tourism— the other current account stabiliser in Sri Lanka’s fragile external account—generated earnings of US $ 404 million in July, up 6 percent from a year ago.
The cumulative earnings for the first seven months was US $ 2.6 billion, up 13.7 percent from the same period last year, on total tourist arrivals of 1.38 million.
Sri Lanka is among the South Asian countries which has suffered the worst falls in domestic currencies and the external reserves in response to the strengthening US dollar and the emerging market rout of bond and stock markets.
Sri Lanka’s rupee has fallen by over 10 percent so far this year and the currency touched Rs.172.34 against a US dollar, its lowest recorded so far.
Sri Lanka’s foreign exchange reserves were also down by US $ 1.4 billion to US $ 7.2 billion by end September from US $ 8.6 billion in August, as the Central Bank intervened to defend the falling rupee and had to honour debt repayments amid maturing hedging deals.
Under such circumstances, the deepening hole in the trade account and weakening current account flows could form a toxic combination aggravating the currency crisis.